Image: post.gazette.com
That’s right, the GOP Administration is working on jamming through before the next Congress is seated in January a capital gains tax cut of which almost 90 % of the benefits would go to the top 1 % in income. Remember it is this same 1 % who received 80 % of the benefits in the Tax Cut bill Congress passed last winter. We now have a deficit over the next 10 years added by that Tax Cut bill of $1.5 trillion. The federal government faces the largest deficit since the 2008 Great Recession and will be issuing nearly $800 billion in bond financing to make up the difference in the 2nd half of this year.
The following analysis by the Wharton School of Business shows that indexing capital gains to inflation would provide a windfall to the top 1 %:
Sources: Wharton School of Business, The Washington Post – 7/31/18
The Administration knows that it will be difficult to pass another tax cut for the rich through the Senate where 60 votes are needed. So, Treasury Secretary Mnuchin noted at a Latin American conference last week, “we are studying that (inflation indexing capital gains) internally, and we are also studying the economic costs and the impact on growth.” Many experts on tax law find going around Congress to be illegal. The Bush administration in 1992 reviewed the legality of the Treasury department unilaterally making the inflation indexing change and found the department was not authorized to make such a major change in tax law.
Next Steps
We have the lowest level of corporate tax receipts in 75 years, and the tax level on the top 1 % is the lowest in history. We don’t need to be giving the wealthy another tax cut, we know that trickle-down economics never worked.
Sources: World Inequality Database, The Washington Post – 7/31/18
What has really happened since the Reagan years is that tax policy, deductions, asset inflation, executive stock compensation deductions and other financial gimmicks has amounted to a ‘tsunami up’ phenomenon. Actually, our country has the highest level of concentration of wealth in the top 1 % since 1929. Remember from your history books, what happened after 1929 and the Smoot – Hawley trade wars? The Great Depression.
The real priority for our federal government is to Make America a Democracy Again (our post on the political power of the 1%), focusing on how to create basic economic opportunities for all; access to high quality healthcare, reducing student debt, investing in higher education and apprenticeship programs, welcoming immigrants to build our labor force, and investing in our Heartland to bring rural regions of the country into the economic mainstream.